Averting Crisis? Commentary from the International Institutions on the Irish Property Sector in the Years Before the Crash

Ireland has been particularly badly impacted by the current international crisis, with an unprecedented deterioration in government finances and unemployment reaching 14.9 per cent. In many ways, the economic roots of the Irish crisis are quite mundane; the country experienced a classic asset bubble. As early as the year 2000, commentators were pointing Irish policymakers to examples of dozens of property boom/bust cycles in the recent histories of developed economies. What is certainly more controversial is how an advanced social democracy sleepwalked into a crisis that in retrospect seems to have been so apparent. In many ways, the Irish crisis can be considered as having stemmed from a failure of the variety of institutions that helped influence economic policy. This paper will examine what the large international institutions published about the Irish property and construction sectors from 2000 to 2006. It will show that the European Commission published comparatively little of relevance, while the International Monetary Fund in particular produced regular in-depth analysis that challenged prevailing policy. None of the institutions, however, came remotely close to anticipating a near-total collapse of construction activity, rendering inadequate many of their policy recommendations.